The African financial industry is grappling with a significant setback as major international banks withdraw their investments, citing concerns over economic and political instability across the continent. This retreat marks a notable shift in sentiment, with only 48 percent of financial industry players now expecting the sector to remain attractive to international investors, a sharp decline from the previous year’s figure of 60 percent, according to the African Financial Industry Barometer.
The survey, conducted by Deloitte and the African Financial Industry Summit (Afis), reveals that 37 percent of industry stakeholders anticipate a decrease in attractiveness, signaling a potential exodus of international investors and partners. This pessimism contrasts starkly with previous expectations, indicating a growing erosion of confidence in the sector.
“The perception of the African financial industry’s attractiveness has been strongly impacted by economic and political turmoil in the region,” noted the barometer published by Afis.
The decline in attractiveness follows a series of divestments by major international financial institutions, including UK’s Standard Chartered Bank, French lender BNP Paribas, and Paris-based financial services firm Société Générale (SocGen). Standard Chartered’s decision to sell its subsidiaries in several African countries last year underscores the challenges faced by international banks in the region.
SocGen similarly scaled back its operations in Africa, selling part of its businesses in several countries. These withdrawals come amidst a backdrop of macroeconomic and political challenges, including protests, conflict, inflation, and a shift towards domestic borrowing by governments.
The liquidity crunch experienced by financial industry players in 2023 further exacerbated the situation, with 70 percent of respondents citing dissatisfaction with the continent’s capital markets. Liquidity constraints, coupled with political unrest and tightening monetary policies, continue to pose significant challenges for the sector.
Despite these setbacks, there are opportunities for Pan-African banking groups to fill the void left by international banks. With 27 consolidated banking groups currently operating across the continent, local banks such as Equity and KCB Groups are poised to capitalize on the changing dynamics of the African financial industry.
“While challenges persist, the retreat of international banks presents an opportunity for African banks to emerge as influential players,” remarked Afis director Ramatoulaye Goudiaby.
As the African financial industry navigates these challenges, local banks are poised to step up and assert their presence on the international stage, signaling a potential shift in the global banking landscape.